As many tech companies push to counter the use of cash in favor of cards and mobile wallets, some merchants are pushing back by urging the use of cash.

Certain sectors already offer a cash discount—the practice is common with gasoline sales—but on a one-off basis many merchants are unsure how to handle the practice. Despite cash being seen as a counter to the costs and complications of digital alternatives, cash use can also benefit from a bit of targeted technology.

That’s the case for The House, a sports bar and grill in Arlington, Texas, which recently adopted SignaPay's PayLo software to automate cash discounts and saw its payment costs fall by nearly $1,000 a month, said owner Mike Brewer.

Cash drawer
Adobe Stock

“We were paying about $1,100 a month in credit and debit card fees each month and after introducing cash discounts, that number dropped to about $140,” Brewer said.

The House’s average transaction is about $20, and when a server rings it up, PayLo calculates the interchange, card association and network fees to be about 79 cents, according to Brewer. The software then offers a discount of that amount for customers who pay in cash.

“A fee as little as 79 cents may not sound like much, but for a small business it adds up throughout the year,” Brewer said. The House also benefits from improved cash flow since adopting PayLo, according to Brewer.

Customers had mixed reactions when Brewer introduced PayLo a few months ago.

“Some people didn’t like it, but we have a lot of regulars and once they understood the system, they haven’t had a problem with it,” Brewer said.

SignaPay developed its software for merchants who said they wanted to push cash over cards struggled with the complexity of determining an appropriate cash discount and explaining how it works.

“Most merchants know they can offer a cash discount, but they don't know how to execute the whole thing," said Joe Martillo, CEO of SignaPay’s an Irving, Texas-based supplier of payment terminals and software.

PayLo applies a “customer service fee” to each sale made with the company's payment terminal. The customer can skip paying the fee by opting to pay with cash or a gift card, which the merchant must explain, in accordance with card network policies.

The PayLo software calculates a service fee based on the interchange, card association and network fees for each transaction, which may vary based on the card, according to Martillo. Certain cards with richer rewards programs tend to have higher per-transaction fees, he said.

Smaller restaurants, coffee shops and hair salons are among those showing the most interest in PayLo, according to Martillo.

Merchants can set their own cash discount based on their business costs, Martillo said. “PayLo has a flexible fee structure, and we can work with merchants on how much of the card fee to pass through.”

“The merchant services industry is extremely competitive and margins are thin, so anything that differentiates a reseller is a positive, and it also seems to be a good tool for retaining merchants once they experience lower overhead costs,” Martillo said.

Other firms offer different variations of cash-discount programs with card processing. One is Malvern, Pa.-based JetPay. Analysts said JetPay's Limitless cash-discount program, in late 2015, said could be a plus for certain merchants whose business models support such an approach.

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